Indian mortgage lender Housing Development Finance Corporation (HDFC) has announced plans to merge with and into the country’s leading lender HDFC Bank to create a new banking giant.

The two-part deal includes the merger of HDFC Investments Limited and HDFC Holdings Limited with and into HDFC and HDFC’s merger with and into HDFC Bank.

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The merger is aimed at bringing together the housing finance and banking capabilities of the firms to capitalise on the rising home loan demands and consumer lending.

As per the agreement, shareholders of HDFC will receive 42 shares of HDFC Bank for 25 shares of HDFC.

Upon completion, which is subject to regulatory clearance, HDFC Bank will be 100% owned by public shareholders and existing shareholders of HDFC will control 41% stake in the bank.

HDFC chairman Deepak Parekh said: “We believe that the housing finance business is poised to grow in leaps and bounds due to the implementation of RERA, infrastructure status to the housing sector, government initiatives like affordable housing for all, amongst others.”

The combined balance sheet of INR17.87 trillion ($236bn) and INR3.3 trillion ($43.73bn) net worth will allow the firms to offer large ticket infrastructure loans, and increase credit growth pace in the economy, further affordable housing and increase the quantum of credit to the priority sector.

HDFC Bank chairman Atanu Chakraborty said: “The product and market leadership of HDFC in the housing finance business and the distribution and customer leadership of HDFC Bank enable the combined entity to offer a full suite of financial products to Indians at large and the proposed transaction is a big step in realising the vision of housing for all as envisioned by our government.”